In his health care speech before a joint session of Congress, President Obama pointed to Alabama as a state where a single health insurer dominated the market in order to buttress his argument for a “public plan.” An age old question in economics is whether a high market share indicates inefficiency or lack of competition.
A few observations:
- Blue Cross and Blue Shield of Alabama is a nonprofit corporation licensed to sell health coverage to “subcribers.”
- According to a regulatory examination report, in 2007 the company incurred medical claims equal to 92% if its premium revenues, a very high ratio.
- Claims administration expenses represented 2% of premiums; general administrative expenses represented only 6%.
- Net income, including investment income, equaled 2% of premiums.
- According to The Birmingham News, the insurer recently “grabbed the No. 2 spot in a national Consumer Reports poll of patients’ satisfaction with their health coverage.
- The company would appear to be very well capitalized.
Looks as if this is an excellent company. Perhaps its no wonder that other health insurers don’t have more of the market, especially since there are no obvious barriers to entry or expansion that would prevent big national health insurers like United Healthcare and Aetna from expanding in Alabama.
(According to the latest available data (2006-2007) from Kaiser State Health Facts, of the adult (age 19-64) population in Alabama, 65.3% were covered by employment-sponsored health insurance, 7.5% were covered by Medicaid, 3.8% by other public coverage, 4.7% had individual health insurance, and 18.7% were uninsured.)